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by • November 29, 2011 • UncategorizedComments (5)342

“Social enterprise” is a harmful label

Startup advice was mighty confusing before Steve Blank started carving out distinctions between scalable startups and other upstart businesses.

The word entrepreneur covers a lot of ground. It means someone who organizes, manages, and assumes the risks of a business. Entrepreneurship often describes a small business whose owner starts up a company i.e. a plumbing supply store, a restaurant, a consulting firm. In the U.S. 5.7 million companies with fewer than 100 employees make up 99.5% of all businesses. These small businesses are the backbone of American capitalism. But small businesses startups have very different objectives than scalable startups.

Social enterprise is still stuck in the pre-Steve quagmire. The term is being used to refer to everything from restaurants to financial platforms.

A descriptor so inclusive is simply not useful.

(To be clear, I’m picking on the label “social enterprise” and not the actual companies or founders, which are doing crucial and valuable work, regardless of scale)

An unnecessary rift

Jamie Oliver’s restaurant Fifteen is a terrific and socially valuable business[1]. It’s profitable, sustainable, and their model is now being replicated to spread the impact elsewhere.

This is a beautiful business!

Now, imagine a young founder who wants to create a socially impactful technology startup. Their ideal mentor would admittedly be Kiva (impact + scalable tech), but there are precious few Kivas in the world.

Instead, the founder in question has the choice to be mentored by either Tony Hsieh (of Zappos) or Jamie Oliver (of Fifteen). Both founder are at the top of their game and businesses are award-winning.

Who could best mentor our young entrepreneur? Tony, the technology founder or Jamie, the “social enterprise” founder?

Bridging the false divide

With one important caveat[2], Hsieh is the better mentor for this founder by a million miles in every dimension[3].

What about Hsieh vs. Jeff Bezos? Hsieh still wins, even though the latter bought the former’s company. The reason is that Hsieh is a more values-driven founder. Culture is his core value, whereas the traditional “social enterprise” founder values social impact.

I think it’s considerably more useful to divide companies along the axes of:

  • Scalable startup vs. small business
  • Profits-driven vs. values-driven

Social impact is only one of many possible values. Hsieh prioritises company culture rather than social impact, but that doesn’t matter. He’s in the same box of the 2×2 as an impact-driven founder starting a scalable tech company.

Zappos and Kiva are more closely related than Kiva and Fifteen.

“Social enterprise” as a term disguises that, which does the community a huge disservice by preventing knowledge transfer and locking founders into the wrong network.

Impact-driven founders with scale in mind need to discard the false label and prioritise associating with and learning from values-driven technology startups.

[1] Fifteen’s supply chain and staffing process trains people off the street and leaves them with both a job and a marketable skill honed to a high standard.

[2] The exception is in funding. Founders prioritising impact before revenue have substantially different fundraising constraints and opportunities. I’ll write about this in detail in a future post.

[3] On the other hand, a founder starting a local business, grassroots movement, or engaging in collaborative entrepreneurship would be better mentored by Jamie Oliver.

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5 Responses to “Social enterprise” is a harmful label

  1. Ruben says:

    Thanks a lot for this article and sharing your thoughts.

    Simple questions: where would you put someone like Tom Shoe? It’s quite scalable, as far as scalable can be, but it’s purpose driven, isn’t it?

    What about Innocent Smoothies in the UK?

    Best

    Ruben

    • robfitz says:

      Hey Ruben — to my mind, they are product companies with strong values, rather than a social company which happens to make products.

      Founders of any business at all must always make choices about what they care about when deciding how to move the company forward. Basically, I think it makes more sense to sort companies by business model & industry first, and values second — from the perspective of seeking both seeking & giving help and transferring knowledge.

  2. Jan says:

    Great article.

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